This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers visit http://www.djreprints.com.

https://www.wsj.com/articles/SB983570156853402994

Electronic Investor

Game Theory

By

Theresa W. Carey

Updated March 5, 2001 12:01 a.m. ET

Order Reprints

Print Article

Text size

Edited by Randall W. Forsyth

I nvesting is not a game, as anyone who's been in the market the past 12 months can attest. But there are games that can help you hone your investing skills.

Some say that the best way to learn about investing is to throw your money into the market, make a few mistakes, figure out what went wrong and avoid those errors in the future. Such a lesson can be costly, as illustrated by the Chinese sage who long ago said, "To guess is cheap. To guess wrong is expensive."

A pretend portfolio lets you learn the same lessons, but without spending your own money. You can collect information about stocks you're considering, and figure out whether you can handle the vicissitudes of the market. Another useful lesson, if you have the time and patience, is to watch a stock throughout a fiscal quarter, just to see how the market reacts to its performance expectations and earnings announcements.

Financial portal sites, such as Yahoo! Finance (finance.yahoo.com ) and Quicken.com (www.quicken.com ) let you set up a mock portfolio, entering transactions and figuring out your gains and losses based on real data. Most online brokers let you set up a "watch list" as well. Test the market by using a stock-screening program to construct a group of value stocks, or some that have taken a real beating in the last few months. Follow the news on the stocks and see how they react to changing market conditions.

You can also monitor stocks that wind up on the "most active" list all the time. Set up a mock portfolio of technical stocks, or watch a particular sector, such as automobiles.

The possibilities are varied, and since it's not real money, you can track some stocks that you might consider risky, or that you might have thought of as boring during the big tech boom.

Another way to use a test portfolio is to track your employer's publicly traded competition. "Buy" shares of your stock as well as that of each of your competitors. You'll have a quick way to check on the news, market capitalization and financial performance data for your industry.

Stockpicking games are fun ways to figure out how your strategy works. Here are some Websites that give you virtual cash to invest over a short period (usually a month) and offer interesting tools to work with while you play. Early on, these games used end-of-day pricing only, but most of the sites mentioned here now use actual intraday data, so your trades are closer to reality. The games also take commissions into account, and many credit you with interest on your cash balances and dividends paid on stocks you're holding in your pretend portfolio. Some of the games let you trade on margin, too.

MarketPlayer (whose address is www.marketplayer.com ) sets each player up with $1 million of virtual cash, and the U.S. resident with the highest percentage return (including dividends) after four weeks wins a real cash prize. Click on "Competitions" then "Competition Lineup" to see which games are in progress, and which ones you can join. Margin buying and short-selling are permitted. You also can set up your own group competition if you don't want to play in the larger public games.

Marketocracy (it can be reached at www.marketocracy.com ) is running a competition with an interesting payoff: The winner may be put in charge of managing one of its mutual funds. You get $1 million in virtual money, and put together a virtual mutual fund. The site tracks your net-asset value and performance, which sets it apart from most of the other stock trading games. You can see how your picks stack up against professional mutual-fund managers, as well as other Marketocracy members. If your career goals include mutual-fund management, check out this game.

Online broker E*Trade (www.etrade.com ) is currently running its classic E*Trade Game, in which participants start with $100,000 in play money and try to end the period with the highest account balance. There's no short selling or margin trading in the E*Trade games, though.

Ameritrade currently is running its Ameritrade Investors Cup (www.investorscup.com ), which is powered by Simvest Solutions (formerly InvestmentChallenge.com). Start with $50,000 in fictional money and see how you can build it by trading stocks and options, but not mutual funds, bonds or futures. Winners get Ameritrade accounts with $1,000-$10,000 on deposit.

Both of these broker-hosted games let you place trades using their customer trading screens, so you can get a feel for how the system works if you don't have an account open there yet.

CNNfn (cnnfn.cnn.com/services/portcontest ) is scheduled to launch its Capital Gains stockpicking contest on March 12. You're staked to $50,000 to pick the three-to-five stocks that will post the biggest gains in the next week. A new contest starts each week through April 20. The grand prize: a Casio Pocket PC.

Virtual Stock Exchange has dozens of games running at any particular point in time. One of the pioneers in online market simulation, Virtual Stock Exchange, currently has approximately 300,000 users, ranging from seasoned investors to business school students to third-grade classes. You can join a public competition, or set up your own private game and invite your friends and family to play along.

Virtual Stock Exchange was owned by Predict It, which, like many other dot.coms, went under. The game was recently purchased by online content provider Mass Hysteria and was relaunched on February 26.

The new management plans to expand the offerings, focusing on B2B partnerships with online brokers, hoping to aid in the brokers' customer acquisition efforts. Virtual Stock Exchange powered E*Trade's "Survivor Stock Game," which ran last fall.

For a walk down memory lane, keep an eye on A Wall Street Century (address:www.awallstreetcentury.com ), which is currently in hiatus. Sponsored by online broker BUYandHOLD, which is aimed at the long-term investor, A Wall Street Century lets you go back in time and invest your virtual money in companies that were listed on the stock exchanges between 1900 and 2000.

One day of real time is a year in virtual time, so each segment of the game moves along quickly. You're given a budget and little hints about each company's performance from year to year. Prizes are awarded to the winners of each "era," roughly 20 years. Though this game is temporarily on hold, BUYandHOLD hopes to reconvene it sometime this spring.

During the press preview of A Wall Street Century, I won second prize: $500 donated to a charity of my choice.

If you think that buying stocks is just like gambling, check out VersusMarket (www.vsmarket.com ). This recently launched site lets you wager on stocks the way you'd bet on the horses. Stocks are set up in "races" and "matches," and players place bets on which ones will win.

This site bears absolutely zero resemblance to the more traditional portfolio-picking games. At VersusMarket, the players pool their bets and try to guess the winner of a match between IBM and Sun or Rite-Aid and Kmart. The stock that had the highest percentage gain at the end of the trading day is declared the winner, and the pool is distributed among those who placed bets on that particular "match" or "race." This site describes itself as financial entertainment, and includes chat capabilities as well as stock research.

This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com.